The Uniform Law Commission Drafting Committee on what amounts to the "Uniform Series LLC Act" met this weekend in Tucson, and Yours Truly was present as an ABA Adviser. The Committee just has one meeting left (Chicago, March 18-20) before presenting its final product at the National Conference of Commissioner of Uniform State Laws (NCCUSL) at its annual meeting to be held July 7-17 in Stowe, Vermont.

Protected Series LLCs

JDA

The proposed Series Act has gone through quite a transformation from its original draft, largely because of the criticism received at the two previous readings of the Act before NCCUSL. The original version of the Act (with the awful name of "Uniform Series of Unincorporated Business Entities") was meant to be a standalone Act that could plug into any LLC or partnership statute, but the present version has wisely been trimmed down into what amounts to a "module" that a state can insert into its existing LLC Act if it so chooses.

The new Act also incorporate numerous feature meant to create make the proposed Uniform Series LLC Act the most transparent of the various existing state Series LLC acts. Yet, there are still substantial unresolved issues relating to the rights of unsecured creditors, and how a state that adopts the proposed Act will treat so called "Foreign Series LLCs" (i.e., Series LLCs formed in other states), considering that some states have "degraded" Series LLC laws, i.e., laws that are not balanced or adequately protective of creditor rights, but instead have been designed to give LLC formation firms in those states a marketing advantage.

Whether or not the proposed Uniform Series LLC Act will be approved by NCCUSL is far from a given, considering that the proposed Act received harsh criticism from some state commissioners at the last two annual meetings when preliminary drafts were introduced. However, several states -- at least Arizona and Virginia -- are considering Series LLC Acts of their own, and are waiting to see what NCCUSL does with the proposed Uniform Act.